The SME Challenge ─ Cash Flow
Content provided by a guest contributor.
I have always thought that cash flow is king. After all this seems to be the traditional wisdom as I understand it. There are plenty of statistics showing how poor cash flow leads to business failure. (See below as given by Alan J McCafferty, Founder & CEO, SimplyCashflow Limited http://www.simplycashflow.com/blog/small-business-comparative-statistics )
However I was given a new perspective by a short and impromptu presentation given by Michael Andrew of Action Coach. The blinding flash of the obvious (as Michael likes to put it) was this; the problem isn't cash flow, the problem is a lack of sales.
Let's think about that for a second, the problem is sales. If you have more sales then as an SME you'll have more cash and therefore fewer cash flow issues. It just so elegant.
Now I don't want to minimise the balancing act that all businesses, but especially SMEs, go through in balancing the books. Often an increase in sales comes with an increase in associated costs as well; especially if you're selling a low margin product. However, assuming that as a business owner you have sufficient technical experience in your chosen field if business to implement efficient business processes, your chief challenge is to generate sales and by extension manage a shoe string marketing budget.
Large corporations spend enormous sums of cash on creating brand awareness and for a very good reason; brand awareness increases sales. However many SMEs cut their marketing budget to save costs which makes it extraordinarily difficult to generate sales, which in turn deepens the cash flow crisis. However by doing a little digging there are many effective ways to get your brand out there at an affordable cost.
Facebook, Linkedin, Twitter and Google Plus all come to mind immediately. It doesn’t cost anything to join and an SME can expand their reach on these platforms at a very low cost. In addition, by contributing on these platforms and being an active presence an SME or business owner can get their brand out there for no more cost than the time it takes you to contribute.
There are also a variety of low cost yet effective paid for services in terms of creating an online presence. In addition, getting involved in community work and setting up referral networks are a couple of great actions any small business can take that doesn’t cost a great deal of cash yet can enhance sales as well as build your brand and your personal reputation. There’s an old saying that it’s not what you know but who you know. This saying is very true. So it goes without saying that business networking forums are a great way to grow your circle of influence and get to know more people. Joining a business networking group shouldn’t break the bank either.
So let me conclude here with a short blinding flash of the obvious; when preparing your business plan make sure you have an effective marketing strategy in place and grow your sales. You’ll solve a world of cash flow problems.
Blog by Guest Contributor Russel Bason (http://www.linkedin.com/today/post/article/20140611125835-170718853-the-sme-challenge-cash-flow) and kindly shared with SME Toolkit South Africa.